Background: The proposed Butch Lewis Act has been severely narrowed so that the proposed loan assistance program will be available to only a handful of multiemployer plans. This will leave most troubled plans subject to the MPRA suspension process. That process is riddled with procedural unfairness and should be improved. Unfortunately, lobbying groups such as the NCCMP are proposing to make the MPRA suspension process even more unfair than it already is.

The Select Committee on Multiemployer Pensions has been repeatedly told that MPRA has not proven to be the comprehensive solution that its proponents envisioned. Out of the 26 applications for benefit suspensions that have thus far been submitted to Treasury, five have been denied, 10 have been withdrawn, six are under review and only five have been approved.

NCCMP has proposed to remedy this situation by granting trustees virtually unfettered ability to cut benefits for any plan that is in trouble. NCCMP wants to change the current requirement that cuts can only take place after a rigorous review by the US Treasury Department. NCCMP wants to force Treasury to accept the trustees’ cut applications unless those applications are in their entirety “clearly erroneous.” (Although the “clearly erroneous” standard exists in current law, Treasury applies this standard very narrowly.)

If this proposal is legislated into law, the trustees would have the ability to cut pensions without any meaningful agency or judicial supervision. The procedure to obtain benefit suspensions would be as follows: (a) cut applications will be virtually automatically approved by Treasury, (b) participants will be deprived of any judicial review of the cuts or the assumptions behind them, (c) the retiree representative can have conflicts of interest, and his or her actions cannot be challenged in court, and (d) the participant vote on the cuts will be so rigged as to be meaningless. The trustees would have virtually unchecked power to take away accrued pension benefits from workers.

Below we outline a package of reforms that would restore fairness and transparency to the MPRA suspension process.

Standard for Treasury Review of MPRA Suspension Applications

Currently: Treasury must approve the benefit suspension application unless the plan sponsor’s determinations are “clearly erroneous.” To date, however, Treasury has taken a narrow interpretation of the “clearly erroneous” standard.

Currently: Only participants “affected by a benefit suspension” are denied a cause of action under MPRA. Everyone else has the right to go to court, including plan trustees, employers, participants over 80 years of age, those on disability pensions, and other groups.

Proposed: Eliminate this restriction and allow plan participants who are affected by suspensions to bring any cause of action for violation of MPRA. This would allow, inter alia, judicial review of Treasury suspension determinations.

Participant Vote on Benefit Suspensions

Currently: Benefit suspensions are deemed approved by the participants unless a majority of the participants vote to reject the benefit suspensions. A participant’s failure to vote is equivalent to a vote in favor of the suspensions.

Proposed: Adopt Portman proposal: vote should be to either accept or reject the suspensions, to be determined by a majority of the participants who cast votes.

Systemically Important Plans

Currently: A vote by participants to reject benefit suspensions is not binding in the case of systemically important plans, which are plans that are projected to cost the PBGC more than $1 billion if the benefit suspensions are not implemented.

Proposed: Adopt Portman proposal: systemically important plans are bound by vote just like any other plan.

Retiree Representative

Currently: There are no conflict of interest standards governing the choice of the retiree representative. For example, trustees may choose a fellow trustee or a union official as the representative. Retiree representative may not be sued in court by plan participants affected by benefit suspensions.

Proposed: Retiree representative must be entirely independent of trustees, union, and any employer. Expressly preserve the right to sue retiree representative for breach of statutory duties.